BILL ANALYSIS � 1
SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
ALEX PADILLA, CHAIR
AB 1073 - Fuentes Hearing Date:
July 5, 2011 A
As Amended: May 16, 2011 Non-FISCAL
B
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DESCRIPTION
Current law requires investor-owned utilities (IOUs), gas
corporations, and local publicly owned utilities (POUs), in
procuring energy, to first meet its unmet resource needs through
cost-effective energy efficiency and demand response and
requires establishment of annual targets for utilities' energy
efficiency savings.
Current law requires the California Public Utilities Commission
(CPUC) to administer cost-effective energy efficiency programs.
Current decisions of the CPUC approve a $3.1 billion portfolio
of energy efficiency programs for 2010-12 administered by the
IOUs and funded by ratepayer charges, which includes, among
other elements, providing IOU customers with rebates and
incentives for adopting various energy efficiency measures.
This bill requires the recipient of a ratepayer-funded energy
efficiency incentive to certify that any applicable permits, as
appropriate, for a project that involves a physical alteration
or addition to a residential, commercial, or industrial
structure have been obtained and approved prior to applying for
incentives from an energy utility.
This bill defines "energy utility" as an electrical corporation,
gas corporation, local publicly owned electric utility, or
municipal corporation that provides gas service.
BACKGROUND
Energy Efficiency Programs - Energy efficiency is the top
priority in California's policies to achieve energy savings and
reduce greenhouse gas emissions. The state's Title 24 energy
efficiency building regulations, which are updated every three
years, specify requirements relating to lighting, insulation,
windows, heating, ventilation, and air conditioning (HVAC)
systems, and other construction details designed to reduce
energy consumption and lower energy bills for consumers. The
state's Title 20 energy efficiency appliance regulations specify
energy use standards for most major household and commercial
appliances that must be met in order to be sold in California.
Numerous programs administered by the State Energy Resources
Conservation and Development Commission (CEC), CPUC, IOUs, POUs,
and local government agencies offer consumers incentives or
rebates to purchase energy efficiency appliances and construct
or install energy efficient devices or technologies in
residential and commercial buildings.
Energy Efficiency Enforcement - As ratepayer-funded energy
efficiency programs have proliferated, a growing number of
policymakers and stakeholders have been sounding the alarm that
potential energy savings are not being realized because of lax
enforcement of building regulations and licensing requirements
and improper installations by unlicensed or unskilled
contractors. For example, recent reports indicate that, in the
HVAC sector, less than 10 percent of HVAC change-outs are
carried out with building permits, so code enforcement is rarely
triggered.
Efforts to address this problem include the Contractors State
License Board (CSLB) and CEC entering a new Memorandum of
Understanding (MOU) in July 2010 for the purpose of increasing
collaboration on education and enforcement of building and
appliance regulations. The MOU identifies many specific tasks
the CEC will perform, including preparation of outreach and
education materials, training CSLB enforcement staff, assisting
CSLB with investigations of complaints of contractor
noncompliance, and participating in enforcement sting
operations. CSLB, with the assistance of the CEC, conducted
several sting operations in 2010 targeting licensed contractors
who were suspected of installing HVAC units without obtaining
required permits, which the CSLB claims has led to improvement
in compliance.
In addition, the Attorney General convened the CPUC, CEC, CSLB
and the IOUs to secure agreement on a plan for ensuring
compliance with energy efficiency regulations. The CPUC states
that compliance with permit requirements as a condition to
receipt of incentives or rebates will be part of its evaluation,
measurement, and verification of energy efficiency programs in
the 2010-12 program cycle. The current program cycle also
includes $3.8 million for a Compliance Enhancement program aimed
at improving building department code enforcement, and several
other programs with elements aimed at increasing code compliance
on HVAC installation. Southern California Edison instituted a
program in 2010 to give rebates to about 1,000 homeowners who
were required to show proof of a permit and that the installing
contractor was licensed by CSLB. Sacramento Municipal Utility
District, a POU, currently requires that the contractor be
licensed as a condition of receiving a rebate or financing for
installation of a HVAC unit.
COMMENTS
1. Author's Purpose . According to the author, this bill
adds another enforcement mechanism to ensure compliance
with local and state building codes and energy efficiency
standards with the goal of achieving greater energy
savings.
2. Unintended Consequences ? If the requirement in this
bill to self-certify that building permit requirements were
followed when adopting efficiency measures actually results
in more compliance with those requirements, then this bill
may lead to increased energy savings from adopting those
efficiency measures. However, the CPUC, although in
support of this bill, points out, that it could have the
unintended consequence of lower participation in the
state's energy efficiency programs in some jurisdictions if
the cost of obtaining permits exceeds the value of the
economic benefits offered by the programs. For example, a
utility incentive for early retirement of HVAC and
replacement with a high-efficiency unit is about 20 percent
of the cost of pulling a permit. Thus, most customers will
face a net cost increase if they obtain permits for
high-efficiency equipment rebates, and they may view
obtaining a permit as more trouble and cost than it is
worth, according to the CPUC.
3. IOU Enforcement . The IOUs do not oppose the
self-certification required by this bill but object to
having to verify whether a customer seeking an incentive
has actually complied with applicable building permit
requirements. SB 454 (Pavley) approved by this committee
in April and now pending in Assembly Utilities and Commerce
Committee, includes a substantially similar provision to
the requirement in this bill that a customer certify
compliance with building permit requirements prior to
obtaining a utility energy efficiency incentive or rebate.
At the request of the IOUs, that bill was amended to state
that the self-certification requirement does not imply or
create new authority or responsibility of public utilities
to enforce compliance with building, appliance and water
efficiency standards. The author of this bill has
indicated a similar intent with this bill. Thus, the
author and committee may wish to consider amending this
bill to conform to the language in SB 454.
4. Conflict with SB 454 . While this bill addresses
compliance with building permit requirements, SB 454
requires a customer receiving an incentive or rebate to
certify that the energy efficiency measure was adopted both
in compliance with applicable building permit requirements
and by a licensed contractor if a license is required. That
bill does not create any new requirement that work be done
by a licensed contractor beyond what is required in current
law. If both bills were enacted, it would be unclear if a
customer would have to certify to both the building permit
and contractor provisions as a condition to receiving the
incentive or rebate, or if certification to compliance with
applicable building permit requirements would be
sufficient. In order to avoid confusion in the law if both
bills are enacted, the author and committee may wish to
consider amending this bill to require self-certification
that the energy efficiency measure was adopted in
compliance with applicable building permit requirements and
by a licensed contractor if a license is required.
5. Ratepayer Impacts . More than $1 billion per year is
collected from IOU ratepayers to fund energy efficiency
programs. This bill has no direct impact on ratepayers,
although it is possible it might result in more energy
savings generated from energy efficiency incentive
programs, which could possibly reduce the need for more of
these programs in the future.
6. Related Legislation . SB 454 (Pavley), which is
scheduled for hearing in Assembly Utilities and Commerce
Committee on July 5, 2011.
ASSEMBLY VOTES
Assembly Floor (78-0)
Assembly Utilities and Commerce Committee
(14-0)
POSITIONS
Sponsor:
Western States Council of Sheet Metal Workers
Support:
California Public Utilities Commission
Oppose:
None on file
Jacqueline Kinney
AB 1073 Analysis
Hearing Date: July 5, 2011